About the FICO Credit Score
Since we live in an automated world, it should come as no surprise that your ability to repay your mortgage comes down to just one number.
The FICO score is compiled by credit agencies. These agencies use the payment history of all of your loans: credit cards, mortgages, car/boat loans and others.
All three major credit agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. The original FICO was developed by Fair Isaac and Company.
While Experian still calls its score "FICO", TransUnion calls its score "Beacon" and Equifax uses "Empirica." While each of the models considers a range of data available in your credit report, each agency uses the following to build a credit score:
- Credit History - How many years have you had credit?
- Late Payments - Do you have a history of late payments?
- Credit Card Balances - How many accounts? How much do you owe on your accounts?
- Requests for Credit - How many times have lenders pulled your credit report for the purpose of giving you a loan?
These factors are weighted differently depending on which formula the agency uses. The result is a single number: your credit score. Credit scores range from 300 to 800. Higher is always better. Most home buyers have a score above 620.
Your credit score greatly affects how much you pay in interest every month
Did you know? FICO scores are used for more than just determining whether or not you qualify for a mortgage. Lenders give lower interest rates to individuals with higher scores.
Can I raise my FICO score?
Is it possible to raise your FICO score? Some companies promise quick fixes, but they can't do anything different than what you can do — for free. (Of course you can and should appeal incorrect items on your credit report.)
Getting your FICO score
Before you can improve your score, you have to get your score and make sure that the reports from each agency are correct. Fair Isaac has created a web site (www.myFICO.com) that lets you do just that. It's inexpensive to quickly get your FICO score from all three agencies, along with your credit report. Also available are information and tools that can help you understand how to improve your FICO score.
You can get a federally-mandated free credit report once a year from the three major credit reporting agencies at AnnualCreditReport.com. These reports do not include a free score, but it's very inexpensive to get one at the same time.
Now that you have all the facts, you will be a more informed consumer and you'll be better positioned to get the most favorable mortgage.
Curious about your FICO score? Give us a call at 9094671090.